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HomeMy WebLinkAbout08-25-15 IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA ORPHANS' COURT DIVISION IN RE: Docket No. 21-07-0686 ESTATE OF LOTTIE IVY DIXON INSTITUTIONAL TRUSTEE, M&T BANK'S REQUEST FOR STATUS CONFERENCE - o ' o M AND NOW COMES, Institutional Trustee, M&T Bank ("M&V,�,_amd-mal s thg, ::6 following Request for Status Conference, stating in support thereof as follows:'. c, - CA "J c' -C? -TJ -TI 1. On or about March 7, 2014, this Court entered an opinion and Ordar rn sustaining limited objections to M&T's first and partial accounting, but overruling Ethe � overwhelming majority of the objections to this account. 2. That Order (attached hereto with its accompanying opinion as Exhibit"A"), very specifically contemplated the filing of a supplemental account "to provide an explanation for the purpose of those two distributions (listed as "Lottie I. Dixon—Distribution")". See Exhibit"A." 3. On or about May 15, 2014, M&T filed both the supplemental accounting contemplated by that Order, and a motion seeking (i) confirmation of the supplemental account, (ii) an award of attorney's fees and (iii) permission to resign as Trustee. That motion remains pending. 4. In the meantime, however, an appeal was taken from the March 7, 2014 Order by George F. Dixon, IIl, and Richard E. Dixon(the "Brothers) to the Pennsylvania Superior Court, which, by Memorandum Opinion dated May 28, 2015, quashed the appeal as interlocutory. Thus, the matter has since been remanded to this Court. 1 SLI 1379898v] 066255.00089 5. M&T Bank would appreciate a brief conference between and among the Court and counsel for the Bank and the Brothers (and any other counsel who wishes to attend) to discuss the manner in which the pending Motion can be most efficiently adjudicated, such that a final Order within the meaning of Pa. R.A.P. 341 may be issued, and this dispute brought to closure at the Orphan's Court level, such that the Brothers can appeal yet again, (as the undersigned has been told to expect). Respectfully submitted, Dated: 7-"/ , 2015 STEVEN L D. Bradshaw, Esquire Attorney I.D. No. 61975 17 North Second Street, 16th Floor Harrisburg, PA 17101 (717) 255-7357 (610) 371-7362 (fax) mdb@stevenslee.com Attorneys for Accountant, Manufacturers and Traders Trust Company 2 SLI 1379898v] 066255.00089 f: B IN RE: : IN THE COURT OF COMMON PLEAS OF ESTATE OF LOTTIE IVY DIXON CUMBERLAND COUNTY, PENNSYLVANIA C 21-07-0686 ORPHANS' COURT D - IN RE: OPINION ANIS ORDER OF COURT :! Masland,J., March 7,20'14:-- c Background The Lottie Ivy Dixon Revocable Trust(the Trust)was-established in 1985. From r 1985 to 2007, George F. Dixon III and'Richard E. Dixon'(the Brothers)were remainder beneficiaries and M&T(or its predecessor) was the sole trustee. The Brothers became co-trustees in 2007 when their mother, Lottie Dixon, died. On June 26, 2013, M&T filed a first and partial account of the Trust without the signature of either of the Brothers. I. Before the court are multiple objections raised by the Brothers to M&-Ps account The objections can be divided into two categories: objections relating to the management of the trust and objections relating to the format of the account. M&T filed a_motion to strike the objections. Following briefing and argument thereon,we address not only the threshold issue of whether the.Brothers have standing to object to the first and partial account, but also we address the merits of the majority of the objections. i Discussion The only part of the Uniform Trust Code adopted in Pennsylvania that explicitly mentions standing is the Uniform Law Comment to the section dealing with remedies for breach of trust. See 20 Pa. Cogs.SAT.ANN. § 7781. A breach of trust is defined as#a violation by a trustee of a duty the trustee owes to a beneficiary." Id. §7781(a). Simply . 21-07-0686 ORPHANS' COURT B put, '[b]eneficlarjes and cotrustees hav&standing to bring a petition to remedy a breach C of trust." Id. at Uniform Law Comment It is irrelevant if there are multiple trustees; one D trustee can maintain a suit against another trustee, even if the suing trustee participated in the breach. See RESTATEMENT(SECOND)OF TRusTs§200 Comment(e) (1959) (explaining that'the suit is on behalf of the beneficiiary). The Brothers' objections are primarily based on how, M&T allegedly mismanaged the trust in violation of their duty as trustee over the course of 22 years prior to Lottie Dixon's death. Therefore, the bulk of the objections relate to a breach of trust claim. Based on the express language of the Uniform Law Comment, as contingent remainder beneficiaries and cotrustees of the Trust the Brothers have standing to bring a petition LD remedy a breach of trust. See 20 PA.CoNs.STAT.ANN. §7781(a) (Uniforrft Law Comment). 1p Although the Brothers have standing, their claims challenging M&T's actions while their mother was alive are without merit In Pennsylvania,the law is clear that `[r]egardless of the legal capacity of the settlor,the rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively t6, the settlor while a trust is revocable.' Id. § 7753(a). As interpreted by the Joint State Government Commission of the Pennsylvania General Assembly in 2005, '[s]ubsection (a) places a revocable trust on the same footing as a will, under which no beneficial interest is i. effective until the testator's death."' Id. at JT. ST. GOVT. COMM. COMMENT-2005. The Trust was revocable until Lottie Dixon died in 2007. Therefore, as long as Lottie Dixon was alive, M&T only owed a duty as trustee to her and no other beneficial interest was effective until she died. Arguably,the Brothers were not true"beneficiaries" -2III - A 21-07-0685 ORPHANS'COURT until 2007. Furthermore, until 2007, the rights of the beneficiaries, including their right to file a breach of trust action,were subject to the control of Lottie. As such, Brothers' r claims regarding the alleged mismanagement of the Trust while their mother was alive mustfail.1 Similarly, the Brothers' objection to M&T not requiring Lottie Dixon to request distributions in writing is irrelevant "A trustee is not liable a beneficiary for breach of trust if the beneficiary consented to the conduct constituting the breach." 1d. § 7789-. Additionally, "[a]n approval by the settlor of a revocable trust. . binds all the beneficiaries! Id. at Uniform Law Comment- M&T claims that Lotfle telephoned them requesting distributions from the Trust This affirmative action is enough to show that she consented to M&T not requiring her to submit a written request Furthermore, as settlor of a revocable trust, Loffie's consent binds all beneficiaries. Therefore, the Brothers' claims regarding M&Ts failure to require Lotfie to submit a wfftL en request for distributions are immaterial, because she clearly consented to Mrs behavior_ itis possible that the Brothers also lack standing to raise this objection altogether. The Uniform Law Comment further explains that MolloWing the death of the settlor, the beneficiaries would have a right to maintain an action against a trustee for breach of trust However, with respect to actions occur-ring prior to the settlor's death or incapacity, an action by the beneficiaries could be The following eyample illustrates the logic of this argument Assume Mom writes a win In t 985 containing provisions for her two kids including a gift of a checking account containing$5 million. Mom dies in 2007. Even if the checking account only has$5 remaining in 2007,the kids cannot challenge what their mother did with the money from 1985 through 2007. Similarly,the kids cannot challenge changes made to the will from 1985 to 2007(other than claims of undue influence,fraud,duress,etc.). The reason is because the kids'beneficial interest was not effective until their Mom died. Their Mom was free to spend her money and change her will while she was alive. The same logic applies In this case. Lottie Dixon was free to spend her money in any way she wanted while she was alive and M&T had no duty to preserve her money for her children. -3- 21-07-0686 ORPHANS' COURT , barred by the settlors consent or by other events . such as approval of the action by a successor trustee. W. §7753-(Uniform Law Comment) (emphasis added). There are tvo possible interpretations of this Goinment One interpretation is that if the settlor consents, the entire action by the beneficiaries is barred, meaning the beneficla�es lack standing to raise the claim to begin with. On the other hand, the Comment could simply mean that the beneficiaries still have standing to raise the claim but the claim must nevertheless fail If consent is proven.-In either event, the claim fails. j The Brothers' remaining objections relate to the contents of the actual ac.00unt. Generally, accounts in trust matters are subject to the same rules as accounts in general estate matters. See A § 7799,2. Airy party in interest has standing to file a petition to review any part of the account. See 1d. §3521. Therefore,the Brothers have standing to raise their claims regarding the actual format and contents of the account. Orphans'Court Rule 6.1(a) provides, in relevant part, that an account must specify urtlhe dates of all receipts;disbursements and distributions, the sources of the receipts, and the persons to whom disbursements and distributions are made and the purpose thereof shall be stated ..." (emphasis added). Here, there are two substantial distributions listed as YLottie 1. Dixon—Distribution'in the amounts of$1,504,230.00 4 and $167,700.00 With no explanation of the purpose of the distributions. In accordance with the Rules, the court will sustain the Brothers' objections to these two entries in the accounting and refer the matter back to M&T to provide an explanation for the purpose of those two distributions. Following this minor correction,the accounting may be confirmed Vithout the appointment of an auditor. -4- 21-07-0686 ORPHANS' COURT Postscript B - E The court believed that this matter had been resolved with our order of December 28, t 2012, and assumed (after no appeals were fled)that the parties had reached an armistice with l respect to their war to end all wars.Although we are compelled at present to permit the Brothers to proceed, we do so v&h the admonition that we vrill not permit this engagement to 1f` rise to the level of a second world war—a battle over the same borders is not legally tenable. Thus,*we cite the introduction of the preeminent World War l novel,wherein the author, observed that his story`%rvdIl try simply to fell of a generation of men who, even though they may have escaped shells,were destroyed by the war."?Although the artier are standing, they have not escaped the shells. Before they are utterly ! 7 , decimated, we enter the following: 4 , ORDER OF COURT AND NOW,this day of March, 2014 after review of the objections fled by 7 George F. Dixon Ill and Richard E. Dixon to the First and Partial Account of the Trust Under Revocable Agreement with Lottie Ivy Dixon, we find that the objectors have standing with respect to two distributions listed as "Lottie is Dixon—Distribution" in the .amounts of$1,504,230.00 and $167,700.00 and, in accordance with the Rules,the ; court SUSTAINS the objections to these two entries in the accounting and refers the matter back to the Accountant, Manufacturers and Traders Trust Company to provide 2 Erich Maria Remarque,All Quiet on the Western Front(I"ed.-'f 929). -5- r - 21-07-0686 ORPHANS' COURT an explanation for the purpose of those two distributions. In all other respects, the objections are OVERRULED. By the Court, i i Albert H. Masland, J. Kimberly M. Colonna, Esquire 100 Pine Street P.O. Box 1166 Harrisburg, PA 17108-1166 Kevin J. Kehner, Esquire Obermayer Rebmann Maxwell & Hippel LLP 200 LDdUSt Street, Suite 400 Harrisburg, PA 17101 Mark D. Bradshaw, Esquire Stevens & Lee, P.C. 17 North Second Street ' 16'�' Floor Harrisburg, PA 17101 Daniel L. Sullivan, Esquire 26W. High Street i Carlisle, PA 17013 • i Charlotte Ivy Dixon 323 Bayview Street Camden, ME 04843 • - I i I CERTIFICATE OF SERVICE I, MARK D. BRADSHAW, ESQUIRE, certify that on this date, I served a certified true and correct copy of the foregoing Request for Status Conference upon the following counsel of record, by depositing the same in the United States mail, postage prepaid, addressed as follows: Daniel L. Sullivan, Esquire Saidis, Sullivan& Rogers 26 West High Street Carlisle, PA 17013 Kim Colonna, Esquire Elizabeth Mullaugh, Esquire McNees, Wallace &Nurick LLC 100 Pine Street, PO Box 1166 Harrisburg, PA 17108-1166 Charles E. Wasilefski, Esquire Peters & Wasilefski 2931 North Front Street Harrisburg, PA 17110 Charlotte Dixon 323 Bayview Street Camden, ME 04843 Date: Z`� , 2015 Mark D. Bradshaw SLI 1379898v] 066255.00089